Are some corporate profits better than others?


IN FOCUS: Are some profits evil and other profits pure?

RICH KARLGAARD: Boy, this just shows you how far Obama has sunk since four years ago when he promised to be the great uniter. He cannot make an economic speech today without having Bogie man. It is always the oil companies and the banks, it used to be private aircraft, I assume he still does that too, meanwhile he is subsidizing follies like Solyndra. It makes no sense at all. It is dividing the country. It is economically ruinous. it causes the CEO's like Paul Otellini at Intel to have to show Obama around his plant. It is taking one or two points off of America's GDP. It is tragic.

RICK UNGAR: You know Rich and I must have listened to different speeches because I never heard the president vilify anybody's profits. Because the Washington Post put that headline up it makes it accurate? What the president did do in his speech was talk about getting rid of the subsidies which I think we can all agree, the oil companies do not need anymore. Look, there is a very big difference between vilifying business practices, which lead to oil spills that take away the livelihood of an awful lot of Americans and vilifying the profits. There is a big difference in vilifying profits that result when bankers get involved in casino gambling that brings our economy to the brink of disaster and vilifying the profits that they earn. There is a difference. It is unfortunate that you cannot see the distinction between vilifying dangerous business practices and rightfully earned profits.

STEVE FORBES: You talk about a company like Apple with 700,000 workers in China versus a mere 40 or 50 thousand workers here, a demagogue president could easily go after that. President Obama left out when he praised Steve Jobs, that Steve Jobs came to him and said you are going to be a one term president if you continue this kind of anti- business tirade. He also told the president why is it so much easier to get a permit in China to put in a plant? Why do we have all these unnecessary costs and regulations here in the U.S.? Do something about it. The president has done nothing about it.

BILL BALDWIN: Well you know, Barack Obama is onto something good here. I think we should have a surtax on crony capitalism. That means that banks would pay extra because they got a bailout. It would mean that the wind mill and the ethanol companies and the other favor seekers would have to pay extra. That kind of leveling of the playing field could make an awful lot of sense. Here is another thing. Maybe the next time a mortgage company hires a sleazy ex-congressman to get special treatment in the credit market, they should pay a surtax.

MIKE OZANIAN: First of all, this whole thing about Exxon and the oil companies getting favorable treatments is a lot of nonsense. ExxonMobil had an effective tax rate of 40 percent in 2010, higher than most companies in the United States. Secondly, the do not get any more favorable treatment than other manufacturing companies. Look, when you go to Washington to pick winners and losers, and you want politicians to do that, I remember when they were saying Japan is the model we should follow in the late 70s and early 80s because their government was so successfully picking winners and losers. Guess what? That country has had two decades of stagnation. Government picking winners and losers, you are going to end up eating insects off the ground like they do in North Korea.

VICTORIA BARRET: Let's step back a second. This broader issue of "good profits" versus "bad profits." You mentioned Apple, Steve mentioned those factories in China. Those factories in China have deplorable conditions. You have workers standing for fourteen hours a day so their feet swell to the size of elephants and then they go sleep in overcrowded dorms. I mean those societies are really hurting. We get lovely iPads but they are also cleaning our iPad screens with poisonous chemicals before they come to us. So are Apple's profits "good profits"? Where do you draw the line between "good profits" and "bad profits"? I do not know. Goldman Sachs profits look a little better than that.

Scrap government funding to help lower college costs

STEVE FORBES: For inflation, goes up 100 percent in the last 20 years, medical costs 220 percent, college tuition 440 percent because the fact of the matter is, when the government subsidizes something, it becomes more expensive. Administrative costs have gone up in colleges and universities and that is why when one dollar Pell Grant goes in, two dollars go up in tuition. The colleges pocket the money and then some more. So if you want to cut the costs you cut the subsidies and students will have more affordable education. And there is something else David that I think is going to come. Why four years? Why not three years? Take four weeks off in the summer, really save some money and get out in that workforce.

MORGAN BRENNAN: I think it depends if you are talking about state government in this case or federal government. I actually have to disagree on this point because we have seen tuitions more than double in the past decade. While this has been happening we have been watching states pull back on their funding, especially for state schools. We have seen 43 states since 2008 cut funding. We saw $3.5 billion dollars cut from 2009 to 2010. In response we have seen these state schools raise their tuition prices. So no I do not necessarily think we should be pulling government out. I think government has been something that helps keep tuition down.

DENNIS KNEALE: Here is the thing, a couple of figures for you. Whenever federal dollars flood into any market, what happens is inflation. Federal aid is up 55 percent in ten years. Is it any wonder that public, state universities tuition is up 37 percent by cost. Federal aid now 75 percent of all aid. And did you know that private grants to people have gone down to only 4 percent of the total. The biggest problem here is that federal grants are over half of the $140 billion a year the federal government is now spending on college loans, grants that will not be paid back.

RICK UNGAR: First I have to congratulate Steve for getting behind President Obama's proposal in the State of the Union. I was very happy to hear him do that. Setting that aside, you have to look at where federal money goes in terms of contributions to universities. Number one, it is primarily for Pell Grants and for research projects, though I am not sure the money is having the impact that everyone suspects on tuitions. If you want to know where the money is being wasted, and I think money is being wasted, take a walk around the University of California here in Los Angeles. Beautiful campus, a new building going up every day. The money is not being spent where it should be spent, which is on education our students. That is the mistake.

ELIZABETH MACDONALD: I have testified before Congress about tax reform and IRS reform and in that debate was this face: That because universities and colleges have tax exempt status that means they save a lot of money. What they do is, instead of reducing tuition, they spend it on college bling like white elephant football stadiums that cost a lot to service. They have to hire more people, more college bureaucrats to take care of that. It goes towards administrative costs, payroll costs and it does not go towards reducing college tuition. I say every percentage increase that college tuition rises, then you have to pay more taxes into the federal government. Maybe that will get these colleges inline because they really are abusing American families.

RICH KARLGAARD: I think basic research is fundamental to wealth creation and our future prosperity in the United States. What it should get out of is paying college football coaches $4 million a year as Ohio state has pledged to Urban Meyer. Look, the biggest problem in the United States right now is our skills gap and high unemployment. We do not have enough skilled electricians and plumbers and people like that. We really need to make an investment in skilled trade if we want to get unemployment down in this country.

FLIPSIDE: JC Penney scrapping deep discounts on merchandise

VICTORIA BARRET: Hallelujah, I think Ron Johnson is definitely onto something here. We are all fatigued by discounts. You feel like a chump if you pay retail, but even those sale prices you assume the retailer is bumping up the original price so they can knock it down 30 percent. It is not really a sale price at that point it is the price you were going to pay to begin with. I thank him for bringing some clarity to the retail market. I think it is a sign that the economy is turning and consumers are ready to stop with the shenanigans and pay a fair price for something.

ELIZABETH MACDONALD: I hear what he is trying to do. I think his strategy would be better used by rebranding Fannie Mae and Freddie Mac and getting them to have some normal pricing strategy to save taxpayers money. This is a matter of trust. Will we trust the CEO of JC Penney, can an Apple strategy work in a JC Penney store. People go in for retail therapy. They are looking for discounts, they are looking for savings. It is a social event for people to go shopping. I have been in a lot of JC Penney stores and I think people know the jewelry is jacked up. Will we trust the CEO to give the discounts people want on the goods he is now going to sell in JC Penney stores.

BILL BALDWIN: I think I will trust it and I have to say that Victoria is not the only shopper who is getting very fatigued with all the monkey signs with fake sales and with those damn affinity cards. I was shopping for groceries the other day and there was a big poster that said 'No Card Games,' and I thought great, I am going to take all of my grocery business here.

DENNIS KNEALE: I think that Ron Johnson, a disciple of Steve Jobs, think that he can turn JC Penney water into Apple red wine. Not going to work. P&G tried an everyday low pricing strategy, P&G tried it for years in the 90s and had to abandon it. We want the idea that we are getting a good deal. Worse than that, what it is truly a step toward, is I think he wants to make JC Penney Saks Fifth Avenue, high end, in an, discount world.

STEVE FORBES: No, shoppers are looking for bargains. Remember Saturn David, cars sold by GM? They didn't have bargains at their dealers we saw what happened with that. Why do you go to a restaurant and look for the special? You are looking for pizzazz, something to excite you. They figure at some point you are going to have to sell something at a bargain to get them in. So I do not think it is going to last long. Again, this is not an Apple store.


Apple reporting major profits this week and making investors blowout profits over the years. So what we're asking is, what's the "next" Apple stock of the future?

BILL BALDWIN: Novellus Systems (NVLS)